Is Cryptocurrency Digital Gold or a Lottery Ticket?

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S1: This ad free podcast is part of your Slate Plus membership.

S2: Hello and welcome back to the Slate Money swag special where we talk about all of these amazing asset classes that don’t cash flow and whether any of them make any sense.

S3: Last week we talked to Julia Halperin about the art market and decided the art as an asset class doesn’t make a lot of sense. And we concluded after that one that just about anything would probably make more sense than with the possible exception of crypto currency.

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S4: So now we are going to talk about crypto currency. I am Felix Salmon of Mexico. I am joined by annual puppet of the New York Times. Nat how are you doing.

S5: I’m doing well. We start it right off with the with the understanding that what we’re about to talk about is potentially the least significant financial thing. Even less significant than the art market. That’s a I think that’s a good starting place.

S3: I’m feeling good going into this. I mean it seems to be significant. There’s a huge amount of money pouring into it if you compare. I would be interested in this how much actual hard cash dollars of people investing in crypto every year compared to how many hot cash dollars of people spending on every year. Which one do you think is bigger. I think art is probably six billion ish oh six billion ish.

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S5: Yeah. Cryptos easily got that beat. I mean it’s confusing and actually it’s interesting how little that question is asked. I mean you know what people tend to focus on is the price of a bitcoin or an e third token you know is eight thousand dollars nine thousand dollars and then they tend to focus on like if you extrapolate from that the value of all outstanding tokens you know you can see that it’s I think for around 100 billion today but it’s actually hard to tell how much new cash is flowing into it because a lot of the trading that you see out there is just people trading ether for bitcoin or you know many others SRP dash Monaro on down the line and so it can be hard to tell how much money is actually going into this market but six billion dollars easily.

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S3: And there’s two different ways that money is going into it right there’s people just literally taking their dollars and use using them to buy bitcoin or other crypto currencies and then there’s people taking their dollars and using them to buy equity stakes in crypto based block chain based companies. So I’m just not Horowitz has just raised a massive new crypto fund and are lots of others in between those two. It’s what would you say tens of billions a year going into this.

S5: Yeah I mean I do remember somebody did this math once and again it sort of surprisingly hard to get. But yeah I mean you know you have to remember that a lot of people using this I think you know not not as many as was expected at the beginning but a lot of people using this are using it to get money out of this or that country. I mean it is a really great medium for money laundering. And so you know between China and Venezuela and Russia and places with strict capital controls where people are trying to evade taxes you know those those numbers are obviously very hard to track. But I think you could easily say that’s in the billions.

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S3: So basically just to be clear about this if I’m a Chinese person with a lot of money and I’m worried that all of that money could get confiscated by the Chinese government at any moment for any reason then what I do is I use my revenue be to buy a bunch of Bitcoin and then I can sell my bitcoin for dollars and hey presto I have a whole bunch of dollars in the United States that the outside of the reach of the Chinese government.

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S5: Exactly. Although you’re probably not selling it in the United States because the United States is probably going to notice that but you’re probably selling it in Singapore or the Virgin Islands or the Bahamas and you know dealing with some dodgy bitcoin exchange that won’t won’t report that back to the Chinese government won’t worry about the tax consequences of it.

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S3: But the. But the amount of time that my money is tied up in bitcoin in that sense is going to be small. I have no incentive really to just keep my money in bitcoin my incentive is to use Bitcoin as a mechanism to basically convert my revenue be to some other hard currency.

S5: Yeah I mean you would think that was the incentive if people didn’t care at all about bitcoin. If their only interest was in sort of laundering money evading taxes that would be the pattern. But I think what you’ve seen over time and why part of the reason bitcoin has gained in value. Is that you then have this kind of mixed motivation which is you know I want to get my money out of China but also this thing does seem like it keeps going up at random times and so maybe I’ll keep some amount of my laundered proceeds sitting there in bitcoin and hope that it goes up.

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S3: Yeah that’s like the lottery ticket thing that we talked about in the art market too if you buy a whole bunch of paintings then there is a chance that suddenly like one of them will become worth a lot more than you paid for it. And similarly if you buy a bunch of bitcoin you can convert some of them back to dollars or euros. So something nice and solid like that but you can also keep some as a lottery ticket because there is a chance that you will wake up in the morning and it be worth ten times more than you paid for it.

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S5: Yes. I mean I think this is you know where this is where we quickly start to approach this question of what is it because the lottery ticket metaphor is a reasonable one. And I think that is actually what’s driving a lot of people this notion. I mean it’s just a sort of global gambling market. But the other metaphor that’s out there probably more commonly used is this like digital gold metaphor. And this idea that it is something that is a store of value that may actually be more reliable than your local currency. And I mean in fact today that’s only true if your local currency is the Venezuelan bolívar probably and even then it may not be more reliable than the Venezuelan bolívar but there is this notion that you know just as people escaping China after the communist revolution would you know so gold into their clothes as they were leaving here. You know this is the new goal. This is the new way to get out of your country and take your assets with you and there is some notion that it will maintain its value because you know there’s only 21 million bitcoins. And you know it’s this ultra secure system where you know no one has ever managed to create more than those 21 million. And so it’s this scarce supply like gold. And so you have those these competing metaphors of digital gold and the lottery ticket we’re going to talk much more about golden it’s own segment on this podcast.

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S3: But to take that metaphor more seriously.

S6: One thing that we would talk about is that there’s really no financial advisers out there on planet Earth who are going up to people and saying you should really have some percentage of your total net worth in art because that’s a good hedge against bubble. But like one the other hand there are quite a lot of financial advisors out there. Yeah by no means all of them but like a sizable minority of financial advisors out there who do say that there should be some kind of allocation to gold and that you know if you have a decently balanced portfolio it’s going to be mostly stocks and bonds and maybe hedge funds and that kind of stuff. But they will put I know 3 5 percent in gold. Some of them will do you know.

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S7: Have you ever come across any sort of reputable financial advisor is wealth management credit suisse or something like that who are beginning to say you should have a certain asset allocation to crypto.

S5: Yeah I actually thought when you were starting to say that but you were not going to be talking about gold but that you were going to be talking about crypto because I mean I was just looking at a note earlier from Morgan Stanley where they’re saying like this is a reasonable you know Morgan Stanley which is like I don’t know the classiest of the wealth advisors but certainly advising a lot of like smart rich people and saying that this is a reasonable place to start looking at you know allocating some portion of your portfolio. I mean I think you know it’s still tiny it’s 1 percent 2 percent if that but yes you are you are definitely starting to see that I mean obviously Goldman Sachs has set up sort of the beginning of crypto trading desks and you know the reason they’re doing that because they say clients want this and we think it’s reasonable that they want this and we they want it. We want to help them get it.

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S8: I mean so. So I mean it says all Yeah. That’s all very self-serving.

S3: But and again like in the segment I was like well you can make money in the market. It’s called being a dealer. You know you’re buying and selling and I think it’s quite obvious in a volatile market like crypto that if you’re a good trader and you’re nimble and you can buy and sell and you can see what the flows looking like and you get lucky you can make money trading crypto and I can totally understand how Goldman Sachs would like make money trading crypto currency. What I’m more interested in is just as a buy and hold in meant for the wealthy clients of Morgan Stanley and Goldman Sachs. They’re now coming out and saying never mind the trading of it. You can actually make money just or you should have some kind of allocation of just a bunch of crypto currency sitting in your account alongside your stocks and bonds because it makes sense that diversification purposes is something that yes you are.

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S5: You are very much getting exactly that and I mean just on the trading point you know I think this is something you have talked about in the past. But I mean there’s insane opportunities to make money and trading this because it’s such an immature market. And whenever you have immature markets with strange infrastructure there is an opportunity for people you know kind of programmers to get in there and see those weird inconsistencies and see where there’s money to be made. And so you know you’ve just seen people from every high class hedge fund you know Bridgewater all the big trading funds Renaissance all the people who used to do high frequency trading. And it’s really hard to make money trading stocks in that way now. You know it used to be that used to be a good way to make money. But now crypto is where the smart people are trading just because I mean to put it in the simplest terms there’s a lot of dumb money and there’s just a lot of weird things that you can understand and arbitrage and make money.

S8: So tell me right inside. So tell me about the money. Who’s the dumb money.

S3: And are they actually dumb to be in this market.

S5: Well so when you look at the people who own crypto and other asset classes you know most asset classes are dominated the ownership is dominated by institutional investors. So when you trade in the stock markets the bond markets you are going up against people with a lot of information and resources to understand how things are trading crypto you know among asset classes if you considered an asset class is like I don’t know 80 90 percent owned by individuals and you know individuals just you know at the simplest level they just don’t have that much time they don’t have that much information about how the thing is actually traded. So put aside the question of like is this valuable or not just when they’re trading on a day to day basis they don’t really understand how their trade is being rude.

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S8: Sure but not like that. Let’s put this to one. I’m not I’m not really interested in the people who had day trading Bitcoin.

S7: You know I think let those people that they know they’re gambling they know what they’re doing they’ve got their eyes open they’ll make money or they’ll lose money and probably that the money and they’ll get picked off by the more sophisticated counterparty is on the other side of that trades. Let’s not talk about trading because I think trading is not an interesting subject quite so much as just owning it. Is there any value as an investor to owning it or is that to just being the money.

S5: Well OK you’re smart to get right to the heart of the matter because that that is the question facing this whole project. I mean that’s the thing that people are ultimately taking bets on.

S9: And I think people tend to divide this into bitcoin and then all the other coins and you know I think there’s a sense with bitcoin and there’s this sense at Goldman Sachs for instance they have pretty much just stuck to bitcoin because there is a sense that after eleven years now I think it’s actually Bitcoin’s 11th birthday today or right around now that it has proven that it works at some basic level. You have this network with 21 million. Well you know on its way to having twenty one million tokens on it and it has proven in a very basic sense to be secure. People have not managed to counterfeit bitcoins. People have not managed to change the basic ledger that says who owns bitcoins. Obviously there’s a lot of security questions higher up the chain. But at some basic level bitcoin does what it says it does and it is as scarce as it was promised it would be. And you know I think that in some ways this in this sense it really dovetails with the conversation of gold and this question of like well what does that scarcity mean why is that valuable just to have something that is scarce. And you know with bitcoin there’s a whole lot of other questions about like Could this be useful in other ways. You know you have this ledger with 21 one million coins moving around on it. Could that be useful to make payments to do other kinds of financial transactions. And so far it hasn’t been and so far people basically say this is valuable because it’s scarce and it’s secure. And I think that’s you know kind of the argument that now Goldman Sachs and Morgan Stanley will make. So that’s that’s Bitcoin. But then you have you know that seven thousand other coins that exist. And I think you know with each of those you get into this debate where you come down to the question of like is this thing has this thing proven that it can do what it set out to do or something that is useful to people. And I think very quickly when you get past Bitcoin the proof that the thing will do what it says it will do at a very basic level. It’s harder to us to help us that.

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S7: So I don’t understand entirely what you’re saying here because Because Bitcoin is an open source and everyone can see the mathematics behind it and everyone can use the exact same mathematics to create any number of other coins and that’s exactly what they’ve done. All of the other coins and not all of them but the vast majority of the other coins is similarly based on basically the exact same open source mathematics and we’ve talked this one ton this If bitcoin is safe and secure and counterfeit table then doesn’t that mean that all of the other ones too that if all you’re looking at is this idea that it can’t be counterfeited and it has this guest value don’t they all have that. Why is bitcoin different in that sense.

S10: Well they’re I guess two obvious ways. One is that most of the other well the most important is that most of the other coins have less computers backing them.

S5: And when you have fewer computers backing you and this gets into the way computers backed Bitcoin as they mine bitcoin and they’re trying to find new bitcoin. But in doing that they’re also securing Bitcoin they’re making it harder for somebody to come in and you know change the ledger. And so you have you know the equivalent of I don’t know where we are today but you know it’s a thousand of the world’s most powerful supercomputers working at securing bitcoin and most other coins just have a whole lot less than that which means they’re just a whole lot less secure. And it’s a lot easier to change the rules for those other ones. And that’s the other thing with bitcoin is that you now after 11 years have had an understanding that the rules are going to stay the same that there are only going to be 21 million bitcoins ever and that that kind of programmer’s running it are distributed enough that they can’t change that. There’s no one authority who has a power to change that.

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S9: And you know even when you move to the second most valuable coin ether it is still run by a essentially a foundation. And there’s a there’s a leader of it. This guy is italic italic Terran who has actually said we may want to change the number of ether that exist and we may want to change the rules and the rules may change and then you know the economics of the system may change. And you know right there you throw a whole lot more uncertainty into the system so that that uncertainty does exist to a certain degree with bitcoin.

S10: I mean it is possible that you could get you know all the developers who are working on this open source software could you know form a cartel and decide you know what tomorrow we want 42 million bitcoins instead of 21 and they could try to do that. But there are the miners the people with the computers out there are actually a different faction and they could just vote that down. And and what’s happened with bitcoin is that that kind of those checks and balances have worked or they have worked today and then may not always work.

S7: And this is the question which I have about bitcoin one of the many questions I have about Bitcoin. The reason why it’s secure exactly as you say it’s because it has a huge amount of computing power backing it up. The reason it has a huge amount of computing power backing it up is because for all that running those computers is very expensive it still pays to mind bitcoin if you spend a huge amount of money running a computer and then it minds the bitcoin then you can sell that bitcoin for more money than it costs to mine it and you can make a profit. So there’s an economic incentive to mind bitcoin and so long as that economic incentive is that the system remains secure because it has all of these computers backing up. What happens if the price of bitcoin falls significantly let’s say it goes back down to you know three hundred dollars a coin something like that. I know nearly all of the coins have been mined already. So the difficulty of mining a new coin is incredibly high it is extremely expensive in terms of computing power to mine a new coin. But when you do mind that new coin is only worth 300 bucks and you can’t pay for your computing power that way at that point. Doesn’t the whole system stop working.

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S5: Well we’ve actually and this has happened before the price of bitcoin has fallen below the sort of commonly understood cost of what it costs to to mine a new bitcoin.

S7: So what happens when that happens computers drop out of the network and then as computers drop out of network does that make the network less secure.

S5: It makes it proportionately less secure.

S6: So if we saw bitcoin trading at a level below the cost to mine it for a long period of time and it was quite far below the cost of mining a marginal bitcoin then at that point the entire network would actually become pretty insecure.

S11: It would become more a more insecure. I mean you let’s say dropped to three hundred dollars. I guess you just like it did it was trading for a long time at three hundred dollars and there were at that point you know many many I don’t know dozens of supercomputers worth of hashing power around the world kind of securing this even at three hundred dollars you’re still going to get a lot of people who you know they already own the equipment maybe they’re getting free electricity in China. And by the way you know a good proportion of miners are gonna think at that point oh I’m getting these things on the cheap. This shouldn’t this it shouldn’t be at three hundred dollars. Now they may be wrong about that.

S7: But you know what isn’t it cheaper for them to just go out and buying at that point buy the bitcoins on the secondary market than it is to mine them.

S11: Not if they already have the machines if they already bought the machines and they’re getting free electricity. I mean the main cost of mining bitcoin is electricity. And so yes if you’re paying for electricity and you’re paying more than three hundred dollars in bitcoins at 300 hours you’re going to stop doing it and you’re going to you’re going to just buy bitcoins if you’re still a big believer. But there are a lot of people with weird agreements.

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S5: You know the Venezuelan government where they’ve got a lot of excess oil that they haven’t figured out what to do with where government officials have come into large warehouses of mining machines that you know maybe because they arrested the person who was mining them previously and you know so it’s essentially free for them.

S11: There’s some good number of people for whom that’s the case and in any case I mean again I go back to the point that when it was bitcoin was 300 dollars there was a lot of computing power dedicated as it has to go down a lot to be less secure. But I mean look at the at a fundamental level you’re right. You know if the value of bitcoin goes down people will be less invested in the system it will become less secure. I mean with bitcoin you are still making a bet. There’s no question about that.

S3: But to come back to the analogy Julia was saying that basically if you spend less than half a million dollars on a work of art that’s not really an investment grade artwork it’s it’s something else. It might be beautiful it might be you know it might go up in value might go down in value but it’s not really an investment. And it seems to me that what you’re saying is that if you buy any crypto currency that isn’t bitcoin you know it’s a gamble it might go up and it might go down. But in terms of investment grade crypto there’s really just one game in town and that’s Bitcoin.

S5: Yeah. And I would certainly be hesitant to say investment grade even with bitcoin. I mean I do think you know I was talking with a friend about you know investing in seed stage of a startup or you know series a of a startup. I think that bitcoin is probably a more sure bet than I am almost certain that it’s a more sure bet than you know making an early investment in a startup because there’s a 90 percent chance that investment will go to zero. Yeah. And yeah. Right. Maybe that’s that’s the number. Like what’s the chance that this will go to zero. And I think that there are a lot of investments that people make where there is a higher chance of it going to zero than bitcoin down of that you know investment grade.

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S11: To me means like something that a normal reasonable person could anticipate will not go to zero.

S5: You know I think for that you know you have the traditional asset classes but yeah. So I think bitcoin is is sort of one thing and then you get into all the 7000 other crypto assets if you want to call it that just coins tokens that are out there. And of course now now you’re starting to get talk of obviously Libra with Facebook or a Chinese cryptocurrency which many people say shouldn’t be called currency but you know it is something that would be sort of use some of the principles of bitcoin to create some sort of sovereign currency. But that’s that’s obviously going to be a very different category if it comes into being.

S7: So OK. So let’s stick with bitcoin. I’m kind of glad that we’ve managed to narrow this down to bitcoin because if crypto is an asset class was an asset class then that would be super hard to invest in.

S8: There’s no easy way to buy a basket of crypto whereas it’s actually there. That’s my math Metro. It’s much easier to buy a bitcoin. I can open up my square cash app and just press a button and I’ve bought bitcoin. It’s the easiest thing in the world. Yes.

S7: So now that we know that I can the next question is like should I as someone with let’s say investable assets as someone who has some amount of money in stocks and bonds does it make sense as you are saying like the Morgan Stanley program might be saying. Does it make sense to maybe 1 percent of my investable assets to be held in Bitcoin.

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S10: For some reason that is it.

S5: That is a question I have always shied away from but I will say this about it which is you know in some ways a special thing about Bitcoin but in some ways obviously a very dangerous thing about Bitcoin which is that there are all of these kind of early stage technologies that ordinary people can’t buy. There’s just this whole segment of the investing universe that is shut off that is not available to ordinary people. And there’s obviously good reason for that. You know the S.E.C. has decided that ordinary people shouldn’t be able to buy it. It’s just too risky and if they can buy it they’ll buy too much of it and put too much confidence in it. But you know the end result of that for Americans is like you can’t really invest in startups. You can’t. I mean that’s that’s sort of the biggest category that I think of. But there are there are many others. And here is an asset class that’s sort of an early stage technology that you can invest in. And I think you know if you’re somebody who as long as you understand that it’s an early stage technology and you don’t get access to most early stage technologies if you know early stage technology is something that you want to have some bed in. I mean it’s it’s not the same as investing in a startup with a business plan. You have to understand that. But you know the fact that it’s available. It’s again that’s what’s made it dangerous. That’s why people have lost money. But you know there are some significant number of people who have made millions of dollars in some case billions of dollars who were not you know would not have otherwise had access to this kind of back. Now I mean again you could just say like so just go out and place a really large bet and you know in a sports book. But I think this is a slightly more sure thing than that and you know it’s not a one time event. You can hold it. So I don’t know. I mean I don’t know which way that logic cut but it does feel like you are given access to something that you don’t otherwise get access to as an investor.

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S3: So tell me about this idea that Bitcoin is an early stage technology because I hear this quite a lot and you know when it was two or three years old I kind of bought into it and now that it’s eleven years old I’m like eleven is not young. Even by the standards of technology companies there’s you know a lot of big technology companies which are much younger than that which don’t feel early stage.

S12: People talk a lot about the early days of the Internet but how old will Bitcoin need to be before people stop thinking of it as being early stage.

S5: My guess is when it can do something other than just sit there in your account and go up and down. I mean it just it does hold out some promise that it can do something more than that. And certainly this whole other universe of coins holds out that promise even more. You know there are all these coins that have these very specific architectures that are designed to make it easy to do you know weird A.I. computations or to have you know total privacy. And you know those coins are where you can really say almost none of them have delivered. I mean essentially none of them have delivered on their promises maybe maybe the privacy coins have you know there’s coins like Monaro and zoo cash where they just want to be like bitcoin but but reveal no information about the people doing the transactions. And in some sense those maybe are working and you hear a lot of people saying that’s sort of the natural next place to go particularly as it becomes clear that Bitcoin is not that anonymous. As it becomes clear that you will get arrested if you buy child porn or drugs with bitcoin people you know it’s very reasonable think that they’re going to look to some of these privacy coins and so I’m expanding the category here a little bit.

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S11: But there is a whole universe of coins that make promises about what they’ll do and most of them have not delivered on those promises. Bitcoin you know has made promises it can do other things. Originally it was supposed to be digital cash. It was supposed to be a way you could you know buy things online without paying transaction fees to visa. And that hasn’t worked. It’s actually now clear that it’s more expensive to buy things online than it is with visa and it comes with lots of other risks. And so that hasn’t worked. But that’s you know one of the things it potentially could do. And you know this is sort of a strange thing that’s about to happen. The new york stock exchange or the company that owns a New York Stock Exchange has this has gotten into bitcoin in a big way. And they’ve said next year they are going to start working with Starbucks to make it possible to use crypto to buy things at Starbucks. This has been tried before and it hasn’t worked but it hasn’t been tried before by anybody as big as Starbucks or as the New York Stock Exchange as a sort of back end to that system. So you know again you know Bitcoin originally promises to be digital cash maybe it can be more than digital gold maybe you can do more than just sit there. Maybe that that ledger can do other useful things. And I think when you get some sign that it can do other useful things it starts to not become early stage anymore. And you know so far most people I think even Bitcoin believers recognize that it’s not yet doing most of what it could do or has has promised to do.

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S7: So let me let me finish with a question about a bet that I have with Ben Horowitz the venture capitalist in California.

S11: I feel like you’ve got like seven outstanding bets on the price of bitcoin.

S4: I only have one that most most of them I’m actually betting a thousand on my bitcoin bets. I’ve done very well in time. You winning all of my bitcoin bets so far. How did that.

S3: I mean you’ve obviously you’ve you’ve been the guy betting against bitcoin for a long while actually weirdly not like I had won a bet with Patrick Collison of Stripe where I was short volatility. He was like in bitcoin the year is gonna be worth like either less than half or stable less than half of what it is now or more than double.

S4: And I think the other side of that bet and I won something like I don’t like it sometime.

S3: I’m not I’m not I’m not a complete Bitcoin bear. I never have been I’ve never been. This is going to zero and you should you know short it and make lots of money that way if you chose it which is very hard but easier now than it was.

S6: It’s easier now than it was. You have futures contracts.

S7: Yeah. My bet with Ben Horowitz is not about the value of bitcoin it’s about youth and you know whether people are using crypto. But the question I want to put to you is I have stakes for this bet and the loser of the bet is going to have to pay the winner. One Isa and a hundred year old bottle of Madeira wine. So my question to you is in terms of an investment if you are going to hold something for a five year time horizon obviously owning stocks or bonds is something that people own for five years quite happily and they think it makes sense as an investment over a five year time horizon. But let’s move back into this kind of swag world and I give you the choice. You can have 100 hundred dollars worth of bitcoin you can have one hundred dollars worth of ether. Or you can have one hundred dollars worth of wine like 100 year old Madeira wine which is not going to go bad in five years. That is an investment which one would you feel was the safest. Or let me just add one more. One hundred dollars worth of gold.

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S11: Mm hmm. And I don’t have to put any money on the line here so this is this is much safer for me and I but I do. I can’t help but hear the voice of Ben Horowitz when he had to acknowledge defeat on that bet on Planet Money.

S8: It’s such a sad dejected sound from the sad dejected billionaire who made who made way more money on bitcoin than I will ever make.

S5: Yeah. But somehow that moment. I mean he just he was he was just so quiet he had so few words to offer.

S11: But I mean I think you know ether is certainly the most speculative of those because with ether you’re really betting that something is going to happen. You know that they’re gonna figure out how to make that system work in a way that really has not to date. You know with bitcoin you’re to some degree betting that it’s going to continue doing what it is doing at least and that there will continue to be a demand for that and the Madeira wine. I mean I feel like you know I just don’t know the chemistry of that. It feels like it could go bad if you like put it in the wrong cabinet or something. I mean that’s true with bitcoin too if you like put it in the wrong wallet and then you lose your private key. But I don’t know just too much sunlight. I mean I’ve only because I have a greater sense of what it will take for bitcoin to last five years than I do for what it would take for that bottle of wine. Okay. And then I guess we have gold as well which does feel rather antiquated at this point. And you know it is. I mean bitcoin does to some degree just feel like a piece of gold that you can do a couple more things with and that you can reasonably hold yourself without having to put it under the mattress. So I would say in that among those four I would probably take bitcoin. But certainly I mean it’s this is a very strange position for me to be in to be the one who is arguing this whole conversation to argue for bitcoin because I am certainly usually these days on the other side of this. But I think I am you know maybe relative to you or maybe relative to a lot of people. You know it doesn’t work in a lot of ways but it does do something basic that it has continued to do that people didn’t think it would continue doing. And so I think among those four you know I think it would become a harder bet. You know you throw some other stocks real estate commodity in there but with wine and gold and ether I think I feel pretty safe.

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S8: Amazing what would you take. I would you take the wine. Well I mean the great thing about the wine is that like you know how you’re talking about how maybe one day there will be a use that the bitcoin there is always a use for the wine you like if it ever falls in value you can always just drink it.

S10: What if my investment isn’t in is matter what if there’s a blackout you put it in the wrong your refrigerator when you accidentally some sunlight got in there it’s gonna be OK.

S7: It can be cooked. Yeah it could be. It could be a bad investment. So no I think the safest investment to answer my own question I think is gold. We have thousands of years of history of gold. You know obviously fluctuating in value quite a lot but ultimately retaining a certain level of value across all manner of different types of economic backgrounds. And so the idea that gold is what did you say antiquated. I’m like Yeah. That’s actually that’s a feature not a bug. That’s actually what I like about gold is that it’s antiquated that it is shown in you know from antiquity onwards that it has value for reasons that might not make a lot of conceptual sense but have proved themselves in practice there’s a whole lot more consensus there remains a whole lot more consensus there than there is on any of the other three.

S5: So do you and can I ask you Do you own any of those four.

S7: I have bottles of wine. But that’s certainly not for investment right. I have never sold a bottle of wine and I don’t think I ever will. I think one of the reasons I’m doing this entire mini series is to try and help myself get my brain around the question of whether any of these things that don’t have any cash flow attached really are asset classes really something that people should invest in. And my cry is just to be open about this coming into the series is kind of not really. But I’m open to having my mind changed and I am thankful that you came in and tried to make the bitcoin that’s better than gold because it’s an important voice.

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S5: I would say that obviously for investors the question is not which of these things should they only own. For most investors the question is what is the mix that they want between these things and I’m not I’m not saying that kind of logic leads you thinking that you want bitcoin to be part of that mix. But you know if you have some gold and you like that idea I think it’s slightly more speculative version of it and obviously I’m now kind of conceding your point here is that you know a more speculative version of that is maybe a reasonable thing to have a smaller allocation too but I’d be hard pressed to argue that.

S7: So there you go. That’s a good rule of thumb in terms of how much Bitcoin should you own it’s part of your portfolio is like 10 percent of whatever you have in gold if you don’t have anything in gold then you probably shouldn’t have anything in bitcoin if you do have some gold then maybe put some money into Bitcoin that’ll be your role.

S5: I’m not going to sign to that but I like I like Nathaniel Popper.

S4: Thank you very much for coming on Slate Money and let’s have you in the Brooklyn Studio. Next time you’re in New York.

S13: Once you move out to Oakland there’s no going back to the Brooklyn studio. Thank you very much. All right. Thanks.